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Non-conformity with the 2016 Internal Revenue Code

Many of you have heard that Iowa will "not couple" with federal law for Tax Year 2016. To say Iowa will not conform is somewhat misleading. Iowa law will still conform with the Internal Revenue Code (IRC) going forward. However, without action by the Legislature, Iowa law will be conformed with the IRC as it existed on January 1, 2015. Iowa law will not conform with any changes made by the United States Congress after January 1, 2015.

The result is that when Iowa taxpayers calculate their Iowa net income, they will determine their federal adjusted gross income (AGI) as if Congress had not passed the “Protecting Americans from Tax Hikes (PATH) Act” in December of 2015.

For the most part, the calculation of Iowa net income is still the same as the calculation for federal AGI. For example, the De Minimis Safe Harbor Election is not affected by the PATH Act or other recent federal legislation, and Iowa has fully conformed with the Election’s increase to $2500 for costs incurred during taxable years beginning on or after January 1, 2016. However, the calculation of Iowa net income will be different from the federal AGI calculation when it comes to certain items, such as section 179 expensing, that were amended by the PATH Act.

Disclaimer: Please be advised that this is an informational document. It should not be relied upon or otherwise cited as precedent. This information is subject to change at any time. If a member of the public wishes to request a binding decision, he or she must file a Petition for Declaratory Order pursuant to 701 IAC 7.24.